Can I keep my car during a bankruptcy?

There are certain situations where cars cannot be kept during a bankruptcy.  However, in the overwhelming majority of Chapter 7 bankruptcy cases, individual debtors keep the car that they have either by continuing to make financial obligation payments or continue to lease the vehicle.  In other cases, if the vehicle is paid in full, if it doesn’t have significant value, then the property is exempt and free and clear from the long arm of the trustee.  In a Chapter 13 case, the debtor has the option of either keeping the vehicle and paying for it through the Chapter 13 or surrendering the vehicle and eliminating the debt or at least the secured portion of the debt.
Either chapter of bankruptcy, whether it be Chapter 7 or Chapter 13 provide for the ability to keep a vehicle if the debtor continues to pay for either directly or through the Chapter 13.  Either chapter will also allow for the surrender of the vehicle if the debtor decides that it’s not in his or her best interest to be obligated for future car payments.
When you meet with your attorney, you want to go through the budget.  The budget will determine whether or not you have the ability to reaffirm and auto debt under Chapter 7.  If you feel you have the ability to repay, then your attorney will request that the creditors send a Reaffirmation Agreement.  The Reaffirmation Agreement has to be signed by the debtor and the attorney and then sent to the creditor for counter signatures.  Once the agreement is filed, the court has the ability to see whether or not there is a presumption of undue hardship which would prevent you from being able to make your payments on that vehicle.  If the court has a question on it, the court can set a hearing whereby you as the debtor will have to appear before the court and explain to the court how you are going to be able to make those payments without any undue hardship.  In the overwhelming majority of Chapter 7 and Chapter 13 bankruptcy cases, individual debtors keep their vehicles.